Qualitative Response

Regression Models

Linear Probability Model (LPM)

 Logistic Model (Logit)

 Probit Model

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 LINEAR PROBABILITY MODEL
Yi = 1 + 2 Xi + u
E(Y/X) = 1 + 2 Xi
Jika Pi adalah probabilitas bahwa Y=1
dan ( 1- Pi ) adalah probabilitas bahwa
Y = 0 , maka :
Y Probability
0 1- Pi
1 Pi
total 1
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 Continued…..

E(Yi) = 0 ( 1-Pi ) + 1 ( Pi ) = Pi
E( Yi/Xi ) = 1 + 2Xi = Pi dan nilai
0  E(Yi/Xi )  1

Several Problems:
1. Non-Normality of the error terms
2. Heteroscedastic Variance of the error terms
3. Nonfulfillment of 0  E(Yi/Xi )  1

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Continued….
Penaksiran LPM
1. Run OLS, untuk mendapatkan E(Yi/Xi )
2. Tentukan Weighted (w), di mana
w = akar dari E(Yi/Xi )[1- E(Yi/Xi )]
3. Transformasi model menjadi
Yi 1 Xi ui
  2 
w w w w

See example 15.1 – 3 ; 590-593

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LOGISTIC MODEL
Pi = E( Yi/Xi ) = 1 + 2 Xi + u
1
Pi  E Yi / Xi    o   1 X 
1 e
1
Pi  E Yi / Xi  
1  e  Zi 
1
Pi 
1  e  Z i 
1
1  Pi  1 
1  e  Zi 
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Continued…
maka,…
1
1  e  Zi 
1
 Zi  Zi

 1 e
Pi 1 e
  e Zi
1  Pi 1 1  e Zi
1  eZi

 Pi 
Ln   Ln e
Zi
 1  Pi 
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 Estimation of The Logit Model:
Maximum likelihood (MLL)
Letting , f i (Yi )
n n 1Yi

Jo int probabilit y : f Y1 , Y2 ,..., Yn    f i Yi    PiYi 1  Pi 

1 1
n
ln f Y1 , Y2 ,..., Yn    Yi ln Pi  1  Yi  ln 1  Pi 
1
n

 Y ln P  Y ln 1  P   ln 1  P 
1
i i i i i

n   Pi  n
1 Yi ln  1  P    ln 1  Pi 
  i  1
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 Continued…..
1  Pi   1
1  e 1   2 X i
 Pi 
ln     1   2 X i
 1  Pi 

 
n n
ln f Y1 , Y2 ,..., Yn    Yi  1   2 X i    ln 1  e  1   2 X i 
1 1
The log likelihood function is a function of the parameters β1
and β2, since the X are known
Estimation: individual & grouped data (See data SPSS)
Interpretation??
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The Probit (Normit) Model
 Logistic Model: Cumulative Distribution Function
(CDF)
 Probit Model: Normal CDF
To motivate the probit model, assume that the
probability of the event depends on an
unobservable utility index (I), that is
determined by one or more regressors

The larger the value of Ii, the greater the

probability of an events,

Ii = β1 + β2 Xi

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Continued…..

Ii  F 1
I i   F 1 Pi   1   2 X i
where,
Pi  PY  1 X   PZ i  1   2 X i 
 F 1   2 X i 
F-1 is the inverse of the normal
CDF

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Probit Estimation: gprobit
Pi Ii = F-1(Pi)
0,20 -0,8416
0,24 -0,7063
0,30 -0,5244
0,35 -0,3853
0,45 -0,1257
0,51 0,0251
0,60 0,2533
0,66 0,4125
0,75 0,6745
0,80 0,8416 Gujarati,
2003:610
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Continued…..
Pi  F  1   2 X i 
dPi
 f  1   2 X i  2
dX i
The rate of change of probability with respect to
income, see Gujarati, 2003:612

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The Poisson Regression Model
 There are many phenomena where the
regressand is of the count type.
 Some times count data can also refer to
rare, or infrequent, occurrences such
winning more than one lottery within 2
weeks, having two or more heart
attacks in a span of 4 weeks.
 How do we model such phenomena?

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 Continued…..
 Y e 
f Y  
Y!
E Y   
Var Y   
  E Y    1   2 X 2i  .......   k X ki
Poisson. Re gression :
Y  E Y    i     i
 Y e  Estimation Method:
Y  i Y = EXP(c(1)+c(2)*X2i+…..+c(k)*Xki)
Y!
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